AB Volvo – Renault deal expected to finalize by year’s end

AB Volvo is another step closer to the long-awaited acquisition of Renault V.I / Mack, with the transaction expected to finally conclude at the year-end.

Three months after the European Union approved an agreement in principal-whereby AB Volvo would receive 100% of Renault’s truck operations and Renault V.I. / Mack in exchange for 15% of AB Volvo’s shares-Volvo received clearance, pending approval by U.S. district court in Washington D.C., to acquire Renault’s truck business.

Renault will continue to be a Volvo shareholder for at least three years and has declared its intention to increase its holding in Volvo to a maximum of 20% through purchases in the open market in the future.

The approval is subject to the condition that Volvo Trucks’ North American low cab-over-engine (LCOE) business, which amounts to less than 3% of the total North American heavy truck market, be divested. The company said it is already in discussions with other parties over the divestment, which will affect Volvo Trucks’ Xpeditor models, but does not include the Volvo trademark and assembly plants.

The EU’s approval in September also came with its own string of concessions. AB Volvo must divest its holding in Scania within a time period of up to three years; Renault V.I. must divest its 50% holding in Finnish truck distributor RS Hansa Auto Oy within a year after approval by the U.S. competition authority; and Irisbus – the joint venture held equally by Renault and Iveco – must be rescinded within two years.

Volvo said it was eager to begin the implementation process of the truck groups and powertrain units soon after the closing by establishing a new business area, Volvo Global Trucks-which comprises the Volvo, Renault and Mack truck brands. Current Volvo Trucks CEO Tryggve Sthen will be chief executive officer of the new business area.

According to the company, Volvo Trucks and Renault V.I./Mack’s combined sales in 1999 amounted to approximately 151,000 heavy trucks and 22,500 light and medium-heavy trucks. Their combined share of the market for heavy trucks in Western Europe amounts to approximately 28%, and approximately 24% of the market in North America.